New Nevada legislation, which disallows liability insurers from using eroding policy limits, which reduce policy limits by defence fees and costs for all insurance companies in the state, has been criticised by the National Risk Retention Association (NRRA).
Policies likely affected by the new law, and related cost and unavailability concerns, include D&O, cyber, fiduciary, errors and omissions, general liability, excess, personal liability, and possibly other policies – including property.
“This legislation will be cause for concern not just for risk retention groups, but also for the entire insurance industry,” NRRA said.
Assembly Bill 398, sponsored by the Nevada Justice Association passed by a vote of 19 to 1 before the Senate, and will become effective 1 October, 2023.
NRRA said it will have more to report on the Bill after communications with the Commissioner and after it has followed-up with a number of the other industry associations that are contemplating action in response.
Anthony Liolios, government relations and PAC specialist at Lockton, said numerous business and insurance industry groups have warned the Nevada Governor and Insurance Commissioner that the new law will make liability coverage unobtainable due to unavailability or excessive cost.
“It remains uncertain how exactly the new law will apply,” Liolios said. “The broad language in the Bill and legislative history suggest a wide array of policies are subject to the DWL prohibition.”
Liolios noted that Nevada’s Division of Insurance has been asked to exempt surplus lines policies.
“Such an exemption could result in availability of coverage options even if that coverage is still more expensive than what is currently available,” he said.